Osborne offers cities new powers in English 'revolution'

George Osborne arrives at 10 Downing Street as Britain's Prime Minister David Cameron begins to appoint his cabinet after securing a majority goverment, in central London, May 8, 2015.Phil Noble

LONDON (Reuters) - British Chancellor George Osborne offered on Thursday to hand over new powers to cities in what he called a "revolution" in how England is governed that would help them revitalise their economies.

Fresh from a surprise Conservative victory in last week's election, Osborne urged England's cities, which have little institutional identity, to adopt elected mayors and take control of their own affairs.

He announced that former Goldman Sachs economist Jim O'Neill, famous for coining the term BRICs to describe the world's leading emerging nations, had been appointed as a junior minister to help drive devolution to cities.

Last year, Osborne signed a deal with the leaders of Greater Manchester, who are almost all from the opposition Labour Party, under which the city will have an elected mayor from 2017 with new powers over transport, planning, housing and policing.

"My door is now open to any other major city who wants to take this bold step into the future. This is a revolution in the way we govern England," Osborne said in a speech in Manchester.

With Scotland set to get new powers under promises made by London to persuade Scots to reject independence in a referendum last year, calls for devolution within England have grown louder.

The thinking is that local leaders with detailed knowledge of their area's needs can tailor better policies than London bureaucrats.

This fits into Osborne's "Northern Powerhouse" strategy to boost the economy of northern England, which has lagged behind London and the southeast for decades since the collapse of industries like cotton, steel and coal-mining.

A new minister for the Northern Powerhouse has been appointed to underline the government's commitment.

Labour also supports devolution to cities and those who stand to benefit, at least at first, are Labour politicians like Richard Leese, the leader of Manchester City Council who is widely expected to run for mayor in 2017.

But Osborne's Labour critics say his rhetoric is at odds with his record during his first five years in power, when they say his cuts in local authority funding fell disproportionately on poorer councils in northern England.

The northern cities are Labour strongholds but by reaching across the party divide to hand them new powers, Osborne could help revive Conservative fortunes there in the long term.

Analysts also say mayors are central to Osborne's plans partly because winning a mayoral race may be a more realistic target for the Conservatives than loosening Labour's grip over councils and parliamentary seats in the region.

That has been the pattern in London, which is mostly Labour-leaning but has twice elected Conservative Boris Johnson as mayor.